This is the third part of the three part series providing S&P500 earnings reports from Traverse City, Michigan. In this report we will look at how earnings and earnings projections are doing in comparison to previous time periods and on a sector basis along with projections for next quarter. I also included some interesting points at the close of the article for investors in the Traverse City area to think about.
Unless otherwise noted, the numbers in this report are based on the un-weighted operating earnings of the current constituents of the S&P500. The current constituent’s historical earnings are used in any historical comparisons such as quarter over quarter or year over year.
The Fourth Quarter’s Earnings
The fourth quarter reported earnings and earnings projections of those yet to report increased by 3.09% over the January projections of the then current constituents. It is also 1.90% above the beginning of the quarter estimates of the then current constituents. The increase seen this past month is mainly due to better than expected earnings being reported along with an overall increase in the remaining earnings estimates and the constituent change while it was negatively affected by the stock split reported in Part 1.
The fourth quarter earnings are expected to increase 7.31% over the reported earnings of the current constituents the same quarter a year ago.
The largest increases over the year ago earnings are expected in Energy (12.94%), Consumer Staples (11.25%) and Consumer Discretionary (10.31%). Decreases compared to the year ago reported earnings are expected in Telecommunications Services (-28.80%) and Industrials (-0.54%) all other sectors expected to see increases, with the smallest increase expected in Utilities (4.90%).
Overall the fourth quarter earnings are expected to decrease 3.09% below the reported earnings of the third quarter.
Increases in quarter over quarter earnings are expected in Information Technologies (15.57%), Consumer Staples (1.98%) and Energy (1.93%). All other sectors are expected to see decreases compared to the prior quarter with the largest decreases expected in Telecommunications Services (-48.02%), Utilities (-34.60%) and Financials (-10.91%).
The First Quarter’s Earnings Projections
The earnings in the first quarter of 2013 are expected to increase 2.80% over the earnings reported the same quarter a year ago.
The largest increases over the year ago earnings are expected in Consumer Discretionary (14.30%), Utilities (6.78%) and Health Care (6.59%). Decreases compared to the year ago reported earnings are expected in Energy (-6.83%) and Financials (-2.21%) while Materials (0.00%) is expected to come in flat and all other sectors are expected to see increases over the year ago earnings.
Overall the first quarter earnings are expected to decrease 4.87% below the current estimates and already reported earnings of the fourth quarter.
Half of the sectors expect to see increases in quarter over quarter earnings, with the largest increases expected in Telecommunications Services (53.44%), Utilities (18.29%) and Materials (15.40%). The largest decreases in the quarter over quarter earnings are expected in Consumer Discretionary (-23.13%), Energy (-12.71%) and Consumer Staples (-12.30%).
The fourth quarter earnings are currently expected to increase 28.51% higher than the near record earnings reported in the fourth quarter two years ago.
The widening in the expected decreases between the first quarter projections and the fourth quarter since the January update were mainly due to the increase in reported earnings and increased estimates during the fourth quarter, however this estimate also decreased 1.66% below the estimates of the then current constituents of about a month ago. Index changes also played a small part in this estimate decrease as the stock split affected this number negatively and the constituent change had a positive impacted, but the majority of this decrease was due to an overall decrease in earnings estimates for the first quarter.
It is not uncommon for estimates to slip slightly as the next quarter earnings reports draw nearer. It is important to know that the majority of the decrease reported above is due to the better than expected earnings reported in the fourth quarter, and partially due to normal reductions made in earnings estimates as the earnings season draws near.
Many of the current estimates for the first quarter appear to be too low and it seems fairly likely the overall earnings will beat the estimates they were lowered from.
Many of these sources were used in this article.
Have a great day trading,
Disclosure: I am currently about 89% long in stocks in my trading accounts.
Disclaimer: This article is intended to provoke thought about investment possibilities. Acting on the information provided is at your own risk. You are urged to do your own research, and where appropriate, seek professional investment advice before acting on any information contained in these articles.